1

Cross-Border Supervisory Cooperation -

Issues and Challenges

How to Please Multiple Country Supervisors

Washington, DCJune 7, 2006

Everett Schenk

BNP Paribas, Head of North American TerritoryCorporate and Investment Banking

Chairman, Institute of International Bankers

2

BNP Paribas Globally and in the US

BNP Paribas’ Response

Agenda

Improved Cooperation Among Regulators Globally

What’s Next?

3

Leading European Bank with Global Reach, Financially Strong

Presence in 85 countries on the 5 continents

130,000 people worldwide, including BNL

60% outside France 12% in the United States

Net Banking Income (incl BNL) Net Banking Income (incl BNL)

FRB 22 %

CIB 27 %

IRFS 25 %

AMS 14

%BNL 12

%

French

Retail

22 %*

Corp & Invest

Banking 27

%

Int’l Retail

& Financial

Services

25 %*

Asset Mgmt

& Services

14 %

BNL 12 %*

Well-balanced business mix and profitability growing strongly (2005)

Market Cap @ 5/2/06 €70.6bn Net Banking Income (excl BNL) €21.5bn After-tax ROE (excl BNL)

20.2% Net Banking Income by geography (incl BNL)

France 48% Italy 17% Rest of Europe 16% USA 13% Asia & Other 6%

* Retail Banking 59%

4

BNP Paribas platform in the US Consistent with Global Organization

Retail Banking

742 branches in the Western United States

and Hawaii 7th biggest bank in the Western US

2 Brands

Corporate and Investment

Banking (CIB)

Asset Management and Services

Advisory & Capital Markets

Financing Activities Securities Services

InsuranceFAMLIDuerr

Private Banking Miami

Asset Management

FFTW

Presence in New York, Chicago, Dallas,

Houston, San Francisco, Los Angeles

and

CooperNeff Advisory

2,250 CIB Staff

12,250 Retail Staff

350 AMS Staff

5

Regulatory Environment of BNPP’s US Platform

Financial Holding Co Incorporating all business lines under one regulatory umbrella

Home Country Regulator – Commission Bancaire (France)Primary US Regulators

Federal Reserve Bank of New York, Consolidated Supervisor FDICState Banking Departments, primarily New York

Other Significant RegulatorsNY Stock ExchangeSECNASD

Large Complex Banking Organization (LCBO), subject toOnsight regulatory supervision (6 permanent staff)Targeted, horizontal and peer review examinations

CBOT NYMEX BOX

6

BNP Paribas Globally and in the US

BNP Paribas’ Response

Agenda

Improved Cooperation Among Regulators Globally

What’s Next?

7

Improved Productivity of Home/Host Regulatory Relations

Home/Host Country Regulatory Relations have improved enormously over the past few years as bank management and regulators have made strides in improving communication, cooperation, transparency, and standardization of best practices.

Communication Internal communication between a Home Office and its international network Externally - between Home Office and Home Country Regulator

- between local regulated entities and their Host Country Regulators

Cooperation High degree of cooperation between Host and Home Country regulators,

facilitating Increased efficiency for regulators and bank staff Improved quality of examination results Minimization of unnecessary cost and burden

Places a premium on comprehensive and regular internal communication between a Home Office and its foreign operations.

Avoids inconsistent and varying guidance from Home/Host Regulators to the individual banking organization.

8

TransparencyPro-active sharing of information with primary regulators to

provide a complete understanding of business and control activities

Globalization of businesses and reporting has improved information flow to all regulators

Standardization of Best PracticesPromoting broader application of improved operations and

controls through Benchmarking of Best Practices and Horizontal Peer Reviews by Regulators, when available.

Contributing to enhanced understanding of local standards by Home Regulators

Improved Productivity of Home/Host Regulatory Relations

9

BNP Paribas Globally and in the US

BNP Paribas’ Response

Agenda

Improved Cooperation Among Regulators Globally

What’s Next?

10

BNP Paribas’ Response to the New Regulatory Environment

Dedicated North American Territory Functions establishedU.S. Regulatory Relationship Oversight Committee Regulatory Relationship Officers covering all of Corporate and

Investment Banking and Retail Banking for the U.S.Corporate Governance Committee and a process by which all

Controls and Risk Indicators are reviewed

0

6

17

39

21

44

23

32

05

1015202530354045

CorporateGovernance

Compliance Legal Audit

2001

2006

Evolution of U.S. Staff Interfacing with the Primary Regulators in the U.S. (Corporate and

Investment Banking)

11

Dedicated Global Functions Establishment of a Head Office Regulatory Coordinator for all business lines Reinforcement of the Global Head of Compliance role in Paris Creation of a Globally Centralized Regulatory Relationship Function that

oversees the 11 main international territories for action plans, regulatory communications and review of operational controls

Communication Weekly meeting held between Regulator Relationship Officer and onsite

Regulators for status updates Monthly meetings with the U.S. Regulatory Relationship Oversight

Committee to discuss exams, findings and implementation. Participants include Legal, Compliance, Audit, external Counsel and Head Office Management

Semi-Annual meetings between primary U.S. Regulators and BNP Paribas Management (local and global). Alternative meeting locations between New York and Paris

Creation of a Global Regulatory Relationship Function allows BNP Paribas to communicate effectively to all International Regulators.

BNP Paribas’ Response to the New Regulatory Environment

12

BNP Paribas’ Response to the New Regulatory Environment

Addressing Findings/RecommendationsDedicated Internal staff to follow up and help resolve Regulatory

and Internal Audit FindingsDisciplined process for identification of aged or unresolved Findings

are analyzed and escalated to Senior Management, Locally and Head Office

13

BNP Paribas Globally and in the US

BNP Paribas’ Response

Agenda

Improved Cooperation Among Regulators Globally

What’s Next?

14

What’s Next

Develop concrete methods of sharing responsibilities that will produce substantial savings

in aggregate supervisory man hoursand in amount of management and employee time needed by

banks to satisfy various home/host regulators.

Support Chairman Bernanke’s recent call, which was in connection with Basel II implementation, for flexibility among supervisors to ensure appropriate standardization of requirements is combined with flexible accommodation of differing approaches by different institutions that achieve consistent results

Basel II Capital Standards – Encourage the Accord Implementation Group to avoid duplication of validation requirements by home/host regulators

15

Recommend increased reliance on home country data and reporting and supervisory analysis

Unless specifically needed to satisfy host country safety and soundness responsibilities.

Particularly essential in wholesale markets where the risks being measured are cross border and global in their effects.

Support further coordination between home/host regulators regarding examinations and on-site oversight.

Proven efficiencies from joint exams currently conducted by multiple domestic regulators with the US

Home/host regulators who share common standards should be especially well equipped to combine their efforts.

What’s Next

16

How to Please Multiple Country Supervisors

Everett Schenk

BNP Paribas, Head of North American TerritoryCorporate and Investment Banking

Chairman, Institute of International Bankers